Although it has extensive oil reserves, Mongolia has been thwarted by the not having a refinery to process the crude; there is not choice other than to send it to China for processing. At the same time Russia keeps Mongolia’s cars running with its fuel imports. This unsatisfactory state of affairs is soon to change as a new refinery being built with Indian funding will provide Mongolia with its own downstream sector. The refinery will be a veritable game changer enabling the country to transform its crude into petrol, diesel and other petroleum products. It will also end the decade long petroleum dependence on Mongolia’s two giant neighbours, create jobs and stimulate further exploration and development of the country’s hydrocarbon reserves.

The new plant is to be constructed using a USD 1 billion credit line from India’s ‘Export-Import’ Bank. The refinery is expected to have an annual processing capacity of 1.5 million tones: crude oil will be transformed into 560 million tonnes of Euro Standard 4.5 fuel, 670 million tonnes of diesel fuel and 107 million tonnes of liquefied gas.

This year, Mongolia drilled a total of 8.4 million barrel or 1.1 million tonnes crude oil, 6 thousand barrels or 821 thousand tonnes of which were exported to China. Production of crude oil in Mongolia increased from 9.2 thousand barrels per day in July 2012 to 20 thousand barrels per day in June 2017 growing at an average annual rate of 1.92 percent.

The oil refinery is forecast to generate USD 1.2 billion in production revenue annually and will have a USD 43 million net worth. It is expected that the refinery will recoup capital investment costs within 8-10 years.